Finance Digest Magazine

Going Dutch – can banks get a fair share in the age of open banking?

Posted onJune 15, 2018

Nigel Reavley, Head of Financial Services

Open banking. In the last year or so, this concept has given Europe’s financial world a lot to grapple with. The implementation of some pretty historic legislation (did someone say PSD2?), and the entry of a number of agile new players, have seen banking and FS in Europe turn a corner into a new, customer-centric age.

Key takeaways from Amsterdam’s Money 20/20 Europe.

Money 20/20 Europe’s annual Fintech event, which took place last week in the picturesque city of Amsterdam, took the pulse of this brave new world. As PSD2 is now a reality, conversations notably evolved at this year’s event, with many talking about how banks can avoid falling behind.

Compliance may be mandatory, but monetizing investment in new services and delivering better solutions to consumers is key. So, what are the considerations banks need to manage to avoid tripping up?

Fintechs – Friend or Foe?

At its core, the revised Payments Services Directive, or PSD2, is Europe’s regulatory response to encourage fintechs offering new services, insights and analysis into our banking and transactional lives. Innovative new services are rife – from helpful financial management apps to stress-free P2P payments – and so are the new players and business models that come with them.

This wave of newer, slicker services is bringing huge consumer benefits. For banks to keep up, innovation is crucial. But this doesn’t necessarily need to all come from in-house investment.

With a number of small, agile fintechs pushing boundaries and proposing new services at the event, banks can see this as an opportunity for collaboration, or even acquisition, to boost its own offering. We saw this trend in presentations on day one from both ING and HSBC.

A bit of clever thinking is also imperative. While PSD2 requires opening up access to some account data, banks still retain masses of valuable data that can be analyzed, repackaged and monetized to offset compliance investments. Security and compliance with GDPR is also a key constraint on opening up data.

The race to real-time

The question of ‘real-time’ payments was a key talking point both on the keynote stage with Visa and Worldpay, and on the event floor. The world of physical transactions is increasingly being replaced by online, in-app and mobile payments. With the point of interaction becoming increasingly virtual, even transparent (see AmazonGo as one example), banks face the prospect of being squeezed out by the big techs and retailers.

In an increasingly frictionless world, transaction speeds need to keep pace. European regulations demand sub-ten second transaction settlement times, so transactions now are commonly clearing and settling in just two seconds!

System automation is central to banks meeting these demands, but so is a tougher monitoring system. With a reduced transaction processing window, bank’s need new ways to detect and thwart fraud quicker than ever before and AI and tokenization were among the many topics discussed.

Balancing compliance and innovation

What became evident from the regulation stream at the event was that business and strategic challenges need to be tackled in tandem with the technical ones.

With PSD2 now in place, solutions need to be open and compliant, but equally well-managed to protect the data and monetize. In-depth knowledge from industry experts can ensure a strong testing framework is in place from the start and quality is prioritized throughout development. From a more strategic perspective, such guidance can help craft decisions on which new services are best packaged and delivered to customers to help supercharge bank offerings.

Looking long term, ensuring the continued compliance, operational soundness and security of solutions requires regular risk assessments and strong monitoring processes to be implemented.

From our perspective, we’re working with a number of banks to define new testing strategies, roadmaps and long-term strategies in relation to PSD2. It’s interesting to see the wide range of challenges facing banks right now – across standards including PSD2, EMV, nexo, ISO20022 and the payment systems – but the key is to navigate.

The challenge of PSD2, of course, is here and the clock is ticking. But we feel that we are only at the start of something very exciting. The coming months and years are going to see an explosion of ideas and services, but thinking that this is the end of the banks is to underestimate their ability to adapt. Collaboration is the key to successful consumer services and fintechs can be a stepping stone for the banks to achieve success.

Related Items:

Finance Digest is a quarterly Print and Online Publication providing in-depth coverage and analysis of the global financial community covering a wide range of topics from Business, Finance, Banking, Technology, Insurance, Investments, Lifestyle and more.

This website uses cookies We use cookies to enchance your visit and to personalize our content, social media features, ads and to analyze our traffic. You consent to our cookies if you continue to use our website. You can at any time change or withdraw your consent by clicking on show details. Read our Privacy and Cookie Policy to know more.

Accept

Read more

Change Settings

Cookie Box Settings

Cookie Box Settings

Privacy settings

Decide which cookies you want to allow.You can change these settings at any time. However, this can result in some functions no longer being available. For information on deleting the cookies, please consult your browser’s help function.Learn more about the cookies we use.

With the slider, you can enable or disable different types of cookies:

Block all

Essentials

Functionality

Analytics

Advertising

This website will:

Essential: Remember your cookie permission setting

Essential: Allow session cookies

Essential: Gather information you input into a contact forms, newsletter and other forms across all pages

Essential: Keep track of what you input in shopping cart

Essential: Authenticate that you are logged into your user account

Essential: Remember language version you selected

This website wont:

Remember your login details

Functionality: Remember social media settings

Functionality: Remember selected region and country

Analytics: Keep track of your visited pages and interaction taken

Analytics: Keep track about your location and region based on your IP number

Analytics: Keep track on the time spent on each page

Analytics: Increase the data quality of the statistics functions

Advertising: Tailor information and advertising to your interests based on e.g. the content you have visited before. (Currently we do not use targeting or targeting cookies.

Advertising: Gather personally identifiable information such as name and location

This website will:

Essential: Remember your cookie permission setting

Essential: Allow session cookies

Essential: Gather information you input into a contact forms, newsletter and other forms across all pages

Essential: Keep track of what you input in shopping cart

Essential: Authenticate that you are logged into your user account

Essential: Remember language version you selected

Functionality: Remember social media settings

Functionality: Remember selected region and country

This website wont:

Remember your login details

Analytics: Keep track of your visited pages and interaction taken

Analytics: Keep track about your location and region based on your IP number

Analytics: Keep track on the time spent on each page

Analytics: Increase the data quality of the statistics functions

Advertising: Tailor information and advertising to your interests based on e.g. the content you have visited before. (Currently we do not use targeting or targeting cookies.

Advertising: Gather personally identifiable information such as name and location

This website will:

Essential: Remember your cookie permission setting

Essential: Allow session cookies

Essential: Gather information you input into a contact forms, newsletter and other forms across all pages